USA Law and Practice Contributed by: Margo H. K. Tank, Michael Fluhr, Deborah Meshulam, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Meghan Carey, Kathleen Birrane and Eric Hall, DLA Piper LLP
ing a programmer to register as a broker. The definitions of an investment adviser and dealer are similarly broadly construed, such that pro - viding services in the context of investment advice (which might implicate adviser registra - tion requirements) or proprietary trading (which might implicate dealer registration requirements) should be evaluated on a case-by-case basis. To the extent that a person must register as a broker, dealer, and/or investment adviser, such registration comes with additional regulatory requirements and oversight. At the open SEC meeting during which the new dealer rules were adopted (see 7.3 Regula- tory Distinction Between Funds and Dealers ), when questioned directly about the potential for enforcement against AMMs, SEC staff left open the possibility that software developers behind the development of AMMs may be subject to the new rules. Insurtechs have led the industry in the use of technology to streamline and improve the speed, efficiency, and accuracy of the underwriting process, and to provide greater accessibility to insurance. The use of these technologies in underwriting trig - gers regulatory considerations related to data pri - vacy and use, data security, and the responsible use of advanced computational methods, includ - ing AI. The National Association of Insurance Commissioners (NAIC) adopted a model bulletin on the Use of Artificial Intelligence Systems by Insurers that sets forth the regulatory expectation that insurers will adopt a written governance and risk management programme designed to iden - 8. Insurtech 8.1 Underwriting Processes
tify and minimise regulatory risks with respect to the use of AI and other technologies. Similarly, the fundamental notion that insurance can only be solicited and sold through a licensed insurance producer has not changed. But the question of what constitutes a sale or solicita - tion in connection with an embedded insurance transaction on a digital platform and how revenue can be lawfully shared is a regulatory considera - tion in negotiations and agreements between the platform and the insurer or underwriter. 8.2 Treatment of Different Types of Insurance Different types of insurance are treated different - ly in essentially every aspect of their respective businesses across the entire insurance business spectrum, including different standards related to marketing, sales, underwriting, pricing, finan - cial requirements, reserving, reinsurance, claims handling, etc. With respect to each of these functional areas, technology-driven methodolo - gies may trigger different treatment by regulators by line of business. For example, with respect to life insurance, the use of non-traditional risk fac - tors or AI in automated underwriting may result in the imposition of advanced notice obligations in the event of an adverse underwriting decision and the NAIC has adopted guidance regarding regulatory oversight specific to automated life insurance underwriting that does not apply to other lines of insurance. 9. Regtech 9.1 Regulation of Regtech Providers Regtech providers are not regulated directly if the business solely develops and aids with the implementation of software solutions, data analytics and automation tools to enhance
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